Deloitte, which is handling the administration, said the collapse was driven by competition from internet firms and digital streaming of movies and games.

The Uxbridge-based business opened its first store in London in 1989 and now trades from 528 outlets employing 4,190 staff.

Blockbuster is the third casualty in Britain's retail sector in the Christmas aftermath, with many specialist shops struggling against competition from supermarkets like Tesco, online retailers like Amazon and download sites like iTunes.

The retail sector has also been pressured by muted wage growth among its customers and by government austerity measures squeezing household budgets.

Camera specialist Jessops went into administration last week and said it will close all 187 of its stores resulting in 1,370 job losses.

But the move into administration on Monday of HMV, the 92-year old music retailer, has arguably struck the biggest blow to town centres.

Blockbuster, which rents DVDs and video games, opened its first store in the UK in March 1989. It launched an online service in 2002, but the DVD rental model became obsolete in the face of online rental subscription services such as Amazon's LoveFilm and digital streaming.

Deloitte's Lee Manning said the firm would be working closely with suppliers and employees to secure a sale, preserve jobs and generate as much value as possible for creditors.